5 Common Forex Trading Approaches

When it comes to trading, some take an organic price action approach; reading the market and making subjective trading decisions based on recent and actual price movements. Other investors rely solely on technical indicators, to show when they can enter and exit the market according to statistics. The following trading methods have been widely used and remain popular among investors.

1. Range Trading

Range trading is a time-honoured trading method, attractive in its simplicity. It follows the golden rule of buy low, sell high. You simply purchase a currency pair when it is low and wait for it to increase. The key to success with this trading method is to exit at the correct time.

2. Day Trading

As the name suggests these trades are exited before the end of the day, protecting investors from any large overnight movements. Trades may last only a few hours and price bars on charts would be set to one or two minutes.

3. Fibonacci FX Trading

Based on the Fibonacci retracements of technical analysis, this trading method analyses the movement of a currency against a trendline, at intervals determined by the Fibonacci sequence: 23.6%, 38.2%, 50%, 61.8%, and 100%. This could help the investor identify patterns and potentially forecast beneficial trades.

4. Swing Trading

Swing positions are typically held for several days and look to benefit from short-term price patterns. A swing investor might typically look at a chart with bars set to every half hour or hour.

5. Trend Following Trading

Trend following trading methods look to benefit from breakouts that occur when the price moves beyond the highest high or lowest low. Investors tend to buy markets once they have broken through resistance, and sell markets once they have fallen through support levels. Because of the magnitude of moves involved, this type of system has the potential to be one of the most successful Forex trading methods. When markets are volatile, price swings are greater, and trends are more disguised. Therefore, a trend-following system is best for Forex markets that are quiet and trending.

It is important to remember that, even while looking at the same information, some investors will think that a market will rise, and others will be certain that it will fall. Historical and current data can be compared to help determine if trends are likely to continue or reverse.

Overall, experimentation is required to discover which Forex trading method will work best in any given situation. To start experimenting without risking your finances, open a demo account by registering with HYCM. 

Source   Presented by HYCM

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